In my own quest to understand these market changes, I’ve been reading widely, looking for context from those with a deeper knowledge of market cycles than myself. While helping B2B Workforce with their October ERP Consultant Newsletter. I was struck by President Tim Shearer’s letter to ERP Consultants. Tim has a deep background in business and technology consulting, and I thought his explanation of these conditions was an insightful one. He also has an optimistic take on the future of ERP consulting through this crisis – one which is grounded in facts about current market conditions. I am not usually swayed by optimistic viewpoints, but in this case, I was impressed by the knowledge of market cycles that informed Tim’s position, and I wanted to share it with the SAP online community.
In his letter, Tim started by summarizing the conditions we are facing: “The current economic environment is unprecedented in recent history. The credit crisis, with all of its associated causes, has impacted business around the world. The current freeze in the commercial paper market (short term, usually 1-30 day corporate loans) is the cog in the road to recovery. Once the current economic environment improves, and it will, either due to the Fed’s commitment to be the lender to these corporations, or banks doing as they have for 40 years, the near term crunch will evaporate.”
Tim had strong words for those who claim we are heading for another ‘Great Depression’: “The so-called ‘$700B Bail Out,’ which is actually a purchase of illiquid securities, will also pump cash reserves back into banks. This is not a ‘will the crisis go away,’ but a ‘when will it be resolved’ situation. There are a lot of chicken littles calling out that this is the beginning of the Great Depression II. History tells us 2008 is very different from 1929. Herbert Hoover, who was the President at the time, and his advisors took the attitude that the economic problems were cyclical and would correct themselves. Contrast this with our government leadership, from the President, to the Federal Reserve, to a hesitant but ultimately accommodating Congress, where action is being taken to deal with the root causes of the problem. These remedies take time to work, but they will ultimately work.”
As for the near-panic that some folks are feeling lately, such as when they go online and check on their 401Ks, Tim explained how such fears eventually give way to more rational approaches: “Manias eventually turn to panic, which turns to economic contraction, rapid and broad reaching, which turns to irrational fears, which turns to bold people thinking rationally entering into the market, which becomes a recovery with the masses following the bold. This has been true since the Tulip Mania in Holland in 1637, to the irrational expansion of stock market values in the 1920’s, to the tech boom of the late 1990’s, to the housing boom of this decade. Humans are rational beings and ration ultimately prevails.”
One of the distinctions about this downturn is how it is impacting the capital spending that in turn impacts the IT spending that drives SAP investments. No one knows for sure how long it will take for capital spending to loosen up again and push ERP projects forward. But Tim had a good point about this topic as well – ERP is not a indulgence you cut permanently out of your spending: “Who knows how long it will take for business to shake off the caution that this turmoil has created? Capital projects could be affected as long as capital is tight or concern about spending capital is present. But there are a few things to know. First, ERP apps are pervasive in business today and this base requires the use of SAP consultants. Second, while projects may be deferred, the underlying business reason to take on application software replacement or enhancement does not go away.”
Tim’s perspective is a credible juxtaposition to some of the doom-and-gloom pronouncements I have seen. Of course, understanding broader trends is just part of the issue. Our other job is to adjust our own professional approach to fit these market conditions. For tips on that, as well as specific SAP skills that are still in demand in a downturn, Tim pointed readers towards a piece I did for the B2B Workforce Newsletter, “The New Rules of ERP Consulting,” that featured practical ERP consulting suggestions from B2B Workforce Vice President Ray Kelly. Ray gets into some interesting issues in the piece, such as how much rate flexibility consultants should have and which SAP skills they should be focusing on.
I wrote my own piece on “SAP Consulting in Down Markets” for JonERP.com, and one thing I emphasized was the importance of remaining innovative in a downturn. This is not the time for a “deer in the headlights” response. I read a really The economic downturn, the crisis and how BPX can make the difference just the other day by Bernhard Escherich, which made a similar argument. Bernhard’s point was that now more than ever, we should take the opportunity to help SAP customers innovate. In some cases, the latest BPX and Web 2.0 approaches may actually be more affordable than the more traditional approaches to business management that have been put in a temporary spending freeze. Another very useful piece that responds to the latest SAP earnings pullback is from SAP Mentor Dennis Howlett on his ZDNet blog, entitled “SAP scraps year end guidance. Why I’m not worried. Yet.” For a view on the corporate drive towards innovation during a tough economy, I also enjoyed Gavin Heaton’s SAP BPX blog entry on “Redoubling Your Focus On Innovation.”
I should also note that SAP, despite implementing some cost cutting measures of its own, is also continuing to spend around technology innovation. Looking back, I feel that the original blog stories that assumed SAP was halting all tech spending were too hastily written, and I regret Tweeting on one of them myself. This blog entry from the Wall Street Journal offered SAP’s follow up clarification on technical spending and innovation.
As for the individual SAP professional, we can all be on the lookout for how we can add value for SAP users in “bottom up” ways that do not require heavy investment. In some ways, that conversation is just beginning, and I’ll do my best to share any specific tactics or SAP skills that I come across that are effective in this economy as we go forward, and I hope others do the same. We need to hear about these “lean times success stories” and start drawing out the common themes. In the meantime, I think it helps to have an overall market context to inform our own initiatives.
Thanks to Tim Shearer for sharing his comments in this blog entry.